An Alabama Lawmaker Speaks Out On A Consumer Issue

Unfortunately, payday lenders aren’t the only predatory lenders taking unfair advantage of Alabama citizens. I am reasonably sure most Alabamians have seen the numerous television ads telling folks how great title loans are for them. I hope folks who have seen these ads will take the time to find out about how bad title loans really are. Rep. Rod Scott, (D-Fairfield), is serving his second term in the Alabama House of Representatives. He holds a BA in Economics from Yale University and an MBA from Dartmouth and also is a professor at Miles College in Birmingham. Rep. Scott gave some compelling reasons to support reform of the title lending industry in Alabama. His remarks are set out below.

Reform State’s Title Loan Industry

For years now a bipartisan group of legislators has worked to reform the predatory car title lending industry in Alabama. While a diverse group of conservative, religious, and advocacy leaders and groups have supported such legislation, reform has remained elusive. This is more than partially due to the fact that the victims of this unregulated industry – senior citizens, working single mothers, members of the military and veterans – are no match for the deep pockets of the industry and their lobbyists.

Unfortunately, the borrowers victimized by this unregulated industry are many. Take Pamela, a single mother of two who got behind on her bills and ended up turning to a Montgomery area title loan operation to help make ends meet, only to get buried under an insurmountable debt. So far, she has paid her title pawn lender almost 5 times the amount of the original loan but all those payments have only gone to interest. So, despite having paid more than $14,000, Pamela is still struggling to pay off her loan. Her story is not unique, and stories like hers have not been enough to turn the tide for reform.

But, this year is different. The stakes have been raised. In the absence of legislation to provide basic regulation of this industry, as of today, over sixteen municipalities, including several of the state’s largest cities, have joined the fight to curb the damage done through local ordinances and moratoriums.

Local lawmakers have stepped in, where my colleagues and I have failed in the past, to protect both their communities and their local economies from these predatory lenders. From one end of the state to the other, local lawmakers have watched the economic potential of whole neighborhoods flat-line as a result of this unregulated industry. As one Montgomery city councilman put it when discussing how it’s a barrier to economic growth in his own neighborhood, “…No one in their right mind would drive down there and think that it’s an economically flourishing area.”

And he is right. Without basic regulations, this industry is trapping dozens of Alabamians a day into a nearly inescapable cycle of debt and blocking economic progress across the state. Car title lenders and their immoral 300% interest rates are taking money out of the pockets of working Alabamians and from our local economies. Their storefronts increase blight and scare away investment from legitimate businesses. This must end. The time for reform is now. Today, our bipartisan coalition of legislators, 39 strong so far, will introduce legislation to provide true reform to this industry – through remedying the outlandish 300 percent interest rate regularly charged for auto title loans.

This bill will put economic progress in Alabama back on track. This legislation would put in place a more reasonable interest rate, at the most of 36 percent APR, which ought to be plenty of profit on a loan that is already secured by a tangible thing of value – the family car. Under current Alabama law, if a borrower doesn’t repay the loan, a lender can repossess the pawned vehicle and sell it for a profit, sometimes earning thousands of dollars more than the amount loaned. Alabama has always appreciated the value of hard work. But, we don’t appreciate a financial windfall gained by taking advantage of someone who needs money in a desperate time. Our bill will return that surplus money to the borrower.

Alabama deserves real reform. Our local lawmakers and cities deserve to have us heed their calls for reform; they deserve our leadership and strength to fight for them and their economic futures. Our hard working citizens deserve to be protected from this predatory industry. We can do better and we must do better. Now is the time.

This is another battle that Alabama citizens must get involved in. No lender – regardless of what sort of loans they are involved with – should be allowed to charge outrageous interest rates to their customers. Title loans turn the title to a person’s car over to the lender and the loans carry very high interest rates. I hope folks in Alabama will join with Rep. Scott, support him and also encourage other legislators to help him win this battle.